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Friday, January 29, 2010

I thought it was time for an update on the USD and to see how it is following my forecast in my article Currencies - Long term forecast where I analyzed the decline of the USD which started in the middle of the 1980's and continued until the end of 2009.

The 30 year structure revealed a triangle which I labeled as a large wave "B" that could be completed in a couple of years.

All charts in this article are courtesy of Stockcharts.com. Here is an updated daily chart of the USD over the last 2 years:

Notice that the commercials were net long over the last few months of 2009 positioning themselves for a rally in USD. The USD looks like it has completed a "B" wave correction. This structure is sub divided into a,b and c waves on the chart labelled with blue capital letters. You can see that the ending wave includes an extended 5th wave.

A larger "C" wave rally is in its early stages which should last a year or more.

It looks like the USD has completed the first wave 1 up as well as a correction in wave 2 which both are marked in blue colour. I use colours to show the different degrees of the Elliott Wave structure. Currently it is rising in a small wave 1 marked in black. The next should be a small wave 2 correction. We have marked the area of the expected pullback in wave 2 in black colour on the chart.

Here is a close up look at the USD rally in a 60 min. chart of UUP (the UUP simulates the USD) that revealed the short term Elliott Wave Count:

A wave 2 correction ended 14th January 2010 and is marked with a blue "2". The USD is now nearly completing the first small wave of wave 3 (wave 1 of 1 of 3 marked in black colour) which should top in a few trading days and give way to a small correction.

The USD is tracing out a number of wave 1's of different degrees. Should the dollar continue to follow my forecast the next should be a dynamic and rapid rise in wave 3 over the next few months.

Trading vehicle for the USD

If you want to trade USD you could use the UUP (Ticker) which is a trading vehicle for the USD and simulates this currency.

The same pattern as in USD is evident in the UUP which is tracing out a number of 1 waves. Notice the strong volume during the last few weeks of 2009. A long term bottom is in place for the UUP.

There are also leveraged vehicles to trade USD like the RYSBX (Ticker) which is leveraged twice the USD.

Special Report Currencies - Long term forecast
The above is an extract of our special report covering the worlds most important currencies the USD, EURO, the British Pound, Canadian Dollar, Swiss Franc, the Japanese Yen and the Australian Dollar and their relationships. We also have a special section covering East European currencies since they are the most vulnerable. In currencies where the relationship patterns are not clear we have added ratio analysis which in most cases reveals the likely outcome.

Geir Solem is the president and founder of ElliottWaveTechnician which is a forecasting service based on economical cycles, demographics and Elliott Wave theory. He is also the president of Cornupia Capital Ltd. a financial advisory service in mergers & acquisitions, offshore structures, corporate restructuring and takeover defense.